Paul Ryan Backs Tighter Tax Compliance to Patch Road Fund

House Republicans are proposing to tighten tax-compliance rules to keep the U.S. highway fund solvent through mid-December, setting up a clash with their Senate counterparts who said they favor a multi-year bill.

The $8.1 billion House plan, released Monday night, relies largely on revenue gained by giving the IRS more information about mortgages, more time to investigate certain tax avoidance and new rules to prevent people from understating income on inherited property.

The plan is House Republicans’ effort to prevent highway funding from lapsing at the end of the month. Senate Republicans are pursuing their own longer-term plan, which Majority Leader Mitch McConnell said he was discussing with Democrats as well.

The move by Ways and Means Committee Chairman Paul Ryan, a Wisconsin Republican, is meant to buy time for a more ambitious bipartisan plan that would link major international tax changes with a one-time, multiyear infusion of cash into infrastructure.

Senate Republicans, meanwhile, are pushing a multi-year highway funding plan at this time. McConnell, a Kentucky Republican, said Tuesday during a news conference in the U.S. Capitol that there is “bipartisan enthusiasm” in the chamber for multi-year legislation.

Party leaders laid out possible ways to pay for such an approach during a caucus lunch at the Capitol Tuesday, said Senator John Cornyn, the No. 2 Republican in the chamber.

‘Pathway Forward’

“Everybody’s sort of internalizing these pay-fors,” Cornyn, of Texas, said to reporters after the lunch. “They’re not all tremendously popular but there’s a pathway forward.”

There is no specific Senate highway funding plan at this point, said Senator Tim Scott, a South Carolina Republican. Scott added that it’s hard to see how lawmakers would be able to provide four years of funding given likely objections to some of the financing methods, which may include changes to retirement plans for federal workers.

In the House, the short-term plan continues a reversal for Republicans this year on tax-compliance measures. Ryan’s predecessor, Dave Camp, last year resisted some of the same tax- compliance ideas when Senate Democrats proposed using them for a temporary highway-funding extension.

“Chairman Ryan opposes any tax increases, and that’s why the revenue offsets are strictly limited to measures that help ensure people pay the taxes that they already owe,” said Brendan Buck, a spokesman for Ryan.

‘Additional Authority’

Last year, Camp said it was “inconceivable” that the House would agree to give the IRS “additional authority to audit and investigate taxpayers simply so Washington can spend more money.” That view prevailed, and last year’s extension was funded largely with “pension smoothing,” which allowed companies to reduce retirement contributions and temporarily boost taxable income.

This year, Ryan and House Republicans have already used tax-compliance measures as offsets, most recently tightening rules on education tax credits to cover the costs of a trade bill. Americans for Tax Reform, the anti-tax group led by Grover Norquist that’s influential among Republicans, generally says compliance measures aren’t tax increases.

Asked what changed, Representative Charles Boustany, a Louisiana Republican, said: “Well, we have a different chairman.”

House Republicans are planning to pass their bill quickly to allow time for back-and-forth negotiations with the Senate, and they got a “late start” looking at options for how to pay for the short-term bill, Boustany said.

Backup Plans

Republicans have backup plans, depending on how the Senate proposes to pay for a highway bill extension, said Representative Tom Reed of New York.

“A year has passed; we have to get a highway bill taken care of,” said Reed, a Republican. “We need it this time to get us through this construction season.”

Meanwhile, Senate Republicans will decide as early as Tuesday on how to pursue a longer-term highway-funding extension. McConnell is trying to extend highway money past the 2016 election.

Senator Jim Inhofe, an Oklahoma Republican who heads a committee in charge of highway policy, restated his position for a six-year bill that highway advocates say provides certainty and time to plan projects. The bill approved by his Environment and Public Works Committee is S. 1647.

‘Good Reasons’

“There’s a lot of good reasons to do it now,” Inhofe said in an interview when asked about Ryan’s plan to do a patch first.

The House bill also doesn’t include an extension of the Export-Import Bank opposed by many House Republicans, including Ryan. The Senate plan likely will include the bank, and that will lead to a clash before the July 31 deadline.

The largest change in Ryan’s plan, raising $1.8 billion over 10 years, would require lenders to give the Internal Revenue Service information about the origination date, address, and remaining principal on mortgages.

A second change would raise $1.2 billion by effectively overturning a 2012 Supreme Court decision that limited the IRS to three years, not six, to investigate certain tax shelters that relied on overstating the basis, or cost, of assets.

The third significant change would generate $1.5 billion by adopting a version of a proposal from the Obama administration. It would make it harder for people to inherit property at one value for estate-tax purposes and then claim a different, higher value to minimize capital gains taxes when the heirs sell.

In addition, the bill dedicates $3.2 billion from Transportation Security Administration fees to the highway fund. It doesn’t raise the fees.

House Republicans are proposing to tighten tax-compliance rules to keep the U.S. highway fund solvent through mid-December, setting up a clash with their Senate counterparts who said they favor a multi-year bill.
The $8.1 billion House plan, released Monday night, relies...